Trade War Could Damage U.S. Consumers More Than China

Trade tensions are boiling over between the U.S. and China. The U.S. has announced $50 billion in tariffs on Chinese products. The Chinese have responded with threats of retaliation. NPR's John Ydstie joins us now to talk about where all this is headed. Welcome to the studio, John.

JOHN YDSTIE, BYLINE: Hi, Audie.

CORNISH: Winners and losers if this trade war escalates?

YDSTIE: Well, so far, the Chinese response has been pretty measured. They say they'll impose $3 billion worth of tariffs on an array of U.S. products, including things like fruit, wine and pork and some recycled aluminum and steel products they import from the U.S. So U.S. industries that produce those things are going to be hurt.

The U.S. hasn't completed its target list yet, but it'll likely punish computers and consumer electronics from China. That would hurt Chinese producers and also hurt U.S. consumers of those products, who would have to pay higher prices. Now, China makes those goods with lots of parts they import from U.S. allies in Asia, so they'd feel the pain, too, says China expert Nicholas Lardy.

NICHOLAS LARDY: So Japan, Korea, Taiwan, Singapore, Malaysia and so forth - our friends and allies will actually bear a substantial portion of the cost.

CORNISH: We've also been hearing about U.S. companies who are concerned about this, right? Which industries could suffer?

YDSTIE: Yeah, there are a lot of companies that are very worried. Boeing is one. China is its biggest foreign customer. U.S. farmers are worried, too. Soybeans and sorghum are likely to be on China's hit list. Nike and Walmart and General Motors also could be hurt.

On the other hand, lots of U.S. companies complain vehemently about Chinese theft of U.S. intellectual property, and there's evidence to support their complaints. They include some big defense contractors like Lockheed Martin, which supports the tariffs. And so do solar panel manufacturers. Elon Musk, who doesn't like the duties imposed on his Teslas by China, also wants action.

CORNISH: What have we been hearing from China so far?

YDSTIE: Well, one of the things that they might consider is that they would not buy and hold as much U.S. debt. Their appetite for our debt has helped keep U.S. interest rates low. But we heard today from Chinese Ambassador Cui Tiankai, who told Bloomberg Television that China might reconsider whether it wants to keep lending the U.S. money by purchasing U.S. Treasury bonds.

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CUI TIANKAI: We're looking at all options, and that's why we believe any unilateral and protectionist moves would hurt everybody, including the United States itself.

YDSTIE: He went on to say U.S. companies, the financial markets and the American middle class could be hurt. But, you know, China could be hurt, too, if it chose that path, and that's because if China decided to unload some of its vast holdings of U.S. debt, the value of those bonds would start falling, and China would begin to lose money. Still, Nick Lardy, who's at the Peterson Institute, says history shows nobody wins in a trade war. But he thinks in this case, unless President Trump's ploy leads to serious negotiations, the U.S. is likely to take the biggest hit.